Disaster for Athens as Troika advises EWG to reject austerity plans

Major eurozone crisis as Athens denied access to Nov 16th tranche

CRUNCH TIME

Surprise, surprise – the meeting that the EU flatly denied would happen today just wound up. The output is the biggest bombshell to hit the eurozone in a long time: Greece is to be denied access to the next bailout tranche….unless more cuts and reforms beyond those ‘agreed’ last Sunday are forthcoming.
In what looks to me like a pretty serious case of stabbing Antonis Samaras in the front, news is breaking in Athens as I write that an anonymous EU official has confirmed the International Monetary Fund (IMF) report to the Eurogroup Working Group (EWG) is damning about the cuts ‘agreed’ by Athens last Sunday. This is a direct quote from the document: (my emphasis)

“It is clear that Greece is off track and there is no chance they will cut the debt to 120 percent of GDP in 2020 as envisaged. It will be rather 136%. New prior actions will be needed, on top of the existing [ones] before any new tranches of eurozone and IMF emergency loans to Greece can be paid.“
Shortly after leaving the EWG meeting to leak its entire contents, the eurocrat noted in addition that the costs of a two year extension (the one Schäuble yesterday dismissed as “pure media speculation”) to the Greek repayment schedule “are now seen at around 30 billion euros”.
As per the long-hold Slog view that some disguised debt foregiveness would, in the end, be involved, the report also notes that ‘[debt] restructuring could take the form of a further reduction of the interest rate on existing loans to Greece and an extension of their maturities, but while that would reduce financing costs, alone it would not fill the funding gap’.
So, the good news is that a deal is on the table. The bad news is, Greece hasn’t fulfilled its side of the bargain….assuming anyone in Athens was ever clear WTF that abrgain was in the first place.
I cannot emphasise too much how significant a piece of news this is….so significant in fact, that it’s been leaked just as most European financial and media executives were drifting off for the Friday lunch followed by another weekend of quiet denial in which to recover from reality.
These are the immediate ramifications that occur to me:
1. The Samaras Coalition is dead in the water.
2. There will almost certainly have to be another election in Greece.
3. Allegedly, Greece will run out of money in ten days time. If it isn’t going to get its next tranche of bailout monies, then direct funding for Greece from eurozone member-states looks inevitable. This would have to come from the eurozone’s
permanent bailout fund, the European Stability Mechanism. It will face stiff opposition, especially from countries such as Finland, the Netherlands and Germany.
4. Today’s leaker added that further bank liquidity is also a major urgency. No doubt Mario at the ECB can muddle some more paper around to fudge it, but his options are becoming limited.
5. French officials and bankers will be confined in order to deliver large numbers of kittens about the possibility of Greek default….and the subsequent high possibility of French State bankruptcy.
There is to be another emergency EWG meeting about Greece on Monday. Doubtless Wolfie Schäuble will dismiss this one as ‘a fantasy’ too.
Meanwhile, the world – and I mean THE WORLD this time – waits to hear what the Merkeschäuble version of reality actually is.

 Posted by the Slog
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